Hey everyone,

Any stories to share on house hacking experiences within the NYC area (Queens, Brooklyn, Manhattan, or Jersey City)? Especially as of recently? When I say stories I mean along the lines of...

1. When did you make your purchase?
2. How'd you finance if not via FHA loan?
3. What was the state of the property when you bought it in? (rent ready or in need of rehab)
4. Anything else you can share with regards to this?

Thanks in advance :)

@Olivia Evans

Hey Olivia!

I have a few investments in Nassau And have recently started to help people who are interesting in house hacking! I was surprised at how many realtors are clueless when it comes to the investing aspect of the industry!

Anyways, if you want to check out some properties that would make for decent house hacking and eligible for FHA financing let me know!

@Ryan Cleary hey good morning, thanks so much for your response. I had to look up Nassau (I’m not originally from NYC and had no clue where that was haha) and unfortunately that is too far away from my area of preference. I’m looking for property that is reasonably close to Manhattan which isn’t the easiest so just wondering if anyone has had any success with this.

Hi!

I’m in Jersey City. Started my RE investing journey here in 2014 with my first 2 family house hack. Bought with conventional loan with 20% down. It was in a bad shape so I put in another 40-50k to rehab it. I was living in one unit and renting another which was covering my mortgage payments almost fully. 2014 was a good time to buy because the market was started appreciating fast right after and on top of that a lot of development money started coming in because Brooklyn was getting too expensive. So by 2016 the value of my 1st house doubled and I was able to cash out refi and pull out all of my initial cash investments out of it and buy another beat up duplex in a rougher neighborhood. Rehabbed it and rented it out. Since I bought it for a good price coupled with appreciating rents I was cash flowing really well. My total cash flow between the two properties was covering both mortgages, plus netting me a good chunk of cash every month, plus I was living rent free in one of the units. I know this is pretty much impossible to achieve in today’s JC market, but what I’m implying is that I always tried to identify a neighborhood that was not as developed and was less desirable but had the signs of soon to come development (in path of progress, like a big luxury apartment development being approved by the city, a new light rail stop being planned, etc). 

I was hooked on RE investing, but my main road block to growth was not having enough money for down payment. In 2018 I discovered BP and learned about leveraging debt to make money, leveraging other people's money, and leveraging other people's debt. I realized that buying with FHA was not such a bad idea as long as my cash on cash is good. So I bought my first FHA house, added a unit and house hacked that for a year. Then I moved out and now renting both units. I started networking and partnered up with capital partners to buy bigger deals. I also started utilizing creative financing to buy with no or low money down.

Nowadays, you can definitely find a multi unit building like a duplex with a bonus unit to house hack and at a minimum cover your mortgage and live rent free, or even cash flow a little. I helped my friend acquire a two family with a bonus at the beginning of this year to do exactly that. But keep in mind a couple things* in this market to be able to achieve that you’d have to be willing to live in a less desirable neighborhood, maybe wait a little longer to be able to cash out refi because most neighborhoods have appreciated a lot and any future appreciation is gonna be small. 
Hope I answered your questions and provided some insight. 

@Farrukh Madaminov thank you for sharing your story! Amazing all that you have accomplished so far, it serves as a real inspiration. If you don't mind sharing, what were some of the big ticket items for the rehab of your first property? Also, were you doing a live-in rehab or had you secured living arrangements outside of the property until it was fully move in ready?

It was a live-in house hack. We actually started with a partial rehab in our own unit to make one side livable and ensure the plumbing and heat and electrical were taken care of. Then we paused it and worked on the second unit to get it rent-ready asap. as soon as we finished that and placed a tenant then we finished our own unit. We also did about 60% of the work ourselves (my wife and I). Bit ticket items were updating almost the entire plumbing in one unit, fully updating two bathrooms, putting in a new water heater, some electrical work, and updating the roof all of which were done GCs. 

Hi Farrukh,

I live in JC and looking for similar strategy for real-estate investing. Can you share what neighbourhood still have potential, what are your thoughts on neighbourhood close to liberty science center?

This is my experience and my opinion.  First thing, be mindful of brokers looking to sell you or saddle you with unprofitable properties just to make a sale.   Protect yourself by truly learning what it takes to maintain a property and understanding all the obvious expenses and the not so obvious.   Everybody wants to be a real estate investor, but because very few understand what it really takes, lots of people walk away disillusioned and losing some of their money.   New York, NJersey and Connecticut have lots of very high income people with equally high net worth.  Real wealth not hood rich.   For the few properties that might make you some money, you will be competing with tho$e people.   The very few profitable properties are in need of significant repairs or the result of a situation or a rare set of coincidences (divorce, estate sale, bank short sale, etc).  Again very few and far in between.   You must have a team lined up, an honest broker who will work for you to bring you what you have defined you want.  A mortgage broker and an attorney.   If it needs repairs, you'll need a good contractor and have him be part of the inspection process prior to making the actual purchase.   You want him prior because he will see repairs that your untrained eyes just won't see.

Spend time learning how to identify profitable properties.  BiggerPockets published the enclosed link to help with that.  Study it and learn how to do it quickly.  BiggerPockets has many amazing episodes also.  Listen to at least 100 of them before buying your first property.

I have been sitting on capital for quite some time and unable to catch a profitable multifamily, let alone an apartment.  Main reason:  even with a hefty downpayment, the numbers don't work out.  The acquisition price is too high making the income one could get for the rental not enough to make a profit.   

I concentrate in The Bronx because pricing there is lower than other boroughs.   I'm fully aware that rents are also lower, but when you look at the ratios of purchase price to income, you'll see what I mean.   This is also a borough that I know well and can identify the renters that certain areas are likely to attract.   I also know which areas to stay away from because The Bronx has a lot of low income housing that I don't have the experience to deal with.    Know your market and know what you are willing to do, how many hours per week can you devote to manage your properties in case you choose to self-manage.

Once you identify a property you like, do the footwork.   Assuming that you already know a bit about the area and the population, drive to the neighborhood and walk around at different hours.  I have sat inside my car and watched an area for hours just so I could get a real feel for the area.   Is there a neighbor that places his speakers on his windows to blast his music?   How is parking?  Learn a bit about the schools in the area so that you can contribute in writing a good ad for your rental.    This is your hard earned money and you must protect it by doing all you can to avoid surprises.

Good luck and come back and tell us how you did.

Originally posted by @Jayanti Gupta :

Hi Farrukh,

I live in JC and looking for similar strategy for real-estate investing. Can you share what neighbourhood still have potential, what are your thoughts on neighbourhood close to liberty science center?

 Hi Jayanti,

At this point I’d suggest mostly looking in Greenville, Bergen Lafayette, and sometimes West Side might work. Even these neighborhoods are tough to get a deal in in this market but I’d keep looking, analyzing and making offers. 
Near LSC is a hotter market being close to DT and with so much development and a big funding approved for LCS expansion I’d say it’s overpriced at this point. But doesn’t hurt looking and analyzing deals. You might get lucky. 

Hi @Olivia Evans

@Will B. I second Will B's comment about investing in The Bronx. There are some nicer areas where you can buy a decently priced house and get some decent rent. I bought a 4-unit property in 2019 with an FHA loan and have been house-hacking it. The property pays for itself and then some, even with me living in it. I live steps away from the subway so while it's not Manhattan, it's just a 45 min train ride away. I bought the property for a bit below market value (it ended up appraising about 20k higher than the selling price). I rehabbed the apartment that I live in now because it was really gross. I inherited the tenants (which is good and bad) and their apartments were/are decent but need some cosmetic work. I have slowly been turning over tenants (mainly because they aren't exactly the cleanest people- hello roaches and rats lol and I want to fix up the apartments and put people in them that meet my standard) so as I turn over tenants, I fix up the apartments. I paid about 45k at closing for the property and have put 40k worth of work into the house with about 15k of work left to do. I plan on leaving soon so I will be renting out my apartment and the driveway for some extra cash. Hope that helps!!

I bought my 3 family in the Bronx in 2015 (if that's recent enough lol)... I post about it here:  

https://www.biggerpockets.com/...

Although I def need to do a detailed updated post, but just to recap I refinanced in 2019 and used equity for other investments :-)

Hey Olivia,

I house hacked in the Bronx, Morris Park, in 2017. 

I used my regular bank, TD to finance the home. In hindsight, this was a big mistake. You are better off going to a small local bank. U put 20% down at a 4.25% interest rate on a 30 year loan. Another mistake I made was purchasing the home in my name, do not do this. Use an LLC. Big banks won't allow this, small banks will. So, mistake 1) using a big bank. Mistake 2) purchase through an LLC, rolling into an LLC later on is a pain in the butt.

When I started purchasing real estate I turned to a lot of mentors for advice. The best advice I received was this: for your first purchase buy a good property. Do not cheap out. Do not expect to fix it up. Buy something that is in good condition and will not cause any headaches. So, when I purchased my multi I bought something that was brand new renovation. While the existing structure is from 1955, the interior was gut renovated in 2016 and I was the first to live there after the construction. This was a great move. The property has had it's issues, but they have been minimal. Many folks have very negative experiences with RE investing . . . that is because they buy bad properties. If you buy a bad property that needs work, you will always be working and spending money. Better to buy something new or very well maintained. Renovations are not as easy or cheap as you think. Also, unless you have connections, finding good workers is hard. Now that I own a few properties I have a network of builders, laborers, plumbers, electricians . . . Now I can do work fast and cheap. But it took time to cultivate those relationships. So, simply stated, coming full circle, buy something new or very well maintained for your first home. You will spend less in the long run. Real estate is all about the long game. Think long term. Don't penny pinch.

I had a great experience with my home. I bought a detached 2 family with a garage. I also had information that a train station was going in in the area--which is why I bought my home. First, buy detached if you can, you will experience greater appreciation. Buy something with a driveway or a garage. Parking is very valuable and it is easy money. A garage rents for $500 a month and requires no work. Driveway spots rent for $150-250. I charge my tenants for parking and I rent my garage. Easy money. Do your homework, I did a lot of research and asking around. I let everyone know I was trying to buy a home. One day I was at the barber shop when a MTA employee tipped me off to the train station--best tip ever. 2 months after I purchased my home, the train station was announced and my neighborhood exploded. I have built serious equity. I am now selling my home for a nice profit. 

BONUS ADVICE: 

Gas is easier than oil--less maintenance. 

Make sure all units pay their own gas and electric, DO NOT PAY FOR UTILITIES, terrible rookie mistake. 

Make sure you factor in all costs, closing costs on a 2 fam will run you about $25K, inspection cost, taxes, prep paid taxes, down payment son utilities . . . make sure you know your costs. 

Budget for problems. I set aside $500 per UNIT per month. Meaning, if I own a 2 family, I set aside $1,000 a month for repairs and renovations. I hold it in a separate bank account. 

Call the city to find out what the actual taxes are. Do not trust what the broker or seller tells you. This goes for all costs, do your own research. Ask to see bills.

USE A GOOD INSPECTOR. Do not hire a cheap inspector. I pay my inspector to travel from New Jersey. a small inspection costs me $1,500 but it is worth it. He finds everything. I know exactly what I am buying when I use my guy and he has saved me from making bad decisions.

GET GOOD INSURANCE. A lot of people cheap out on insurance. Once you grow your portfolio, you can under insure because your income will cover any issues. BUT when you are starting out, you cannot afford big problems. I use AIG, they are expensive but amazing. I had a floor in my house after a pipe broke. AIG was there the next day and authorized the work. They cut me a check a few days later. The apartment was gutted and out back together within a week. I was very lucky to have AIG who cut me a check no problem so that I could get the work done. 

Stay organized. Save files on google drive. take lots of pictures. Run your numbers, always. 

Never trust what someone tells you you can get in rent. Go on Zillow and actually see what is renting in your area and for how much. Then, knock off a few hundred bucks--be safe, be conservative. 

I hope this helps! Good luck. If you have any questions or need help modeling, shoot me a message. That goes for all on here. I am happy to help. 

 

@Olivia Evans - check out Sunny episode 210. He now runs a website called famvestor that details the good and bad of his multiple property purchases (he got 4 unit for like $400k) and his financial freedom through house hacking within 5 or so years. He’s in the Jersey City area. Their family is super frugal and did a lot of rehab work themselves. They bought used solid wood oak kitchen cabinets from people for dirt cheap ($200-500) to redo a crappy rental kitchen for cheap and bump the price $$$. Very smart and helpful guy.